Plan to fix Texas budget hole taking shape

February 12, 2011

Texas lawmakers who make fiscal austerity their calling card have come face-to-face in recent weeks with the specter of staggering cuts to public education and health care, and they appear ready to blink.

There is still no groundswell for new taxes, and nobody expects one. But as the Legislature moves into the nitty-gritty of writing an extra-lean budget, there is growing agreement that more revenue — billions of it — will be needed to help bridge the gap.

The two biggest and most popular sources of new money: The so-called Rainy Day Fund and old-fashioned, smoke-and-mirrors accounting gimmicks. These options could wipe out half or more of the shortfall, officially estimated at $15 billion. It’s also possible an improving economy will fatten tax collections, though the official in charge of making those estimates says legislators shouldn’t count on it.

“It’s insane not to use the Rainy Day Fund,” said Sen. Kevin Eltife, a Republican from conservative Tyler.

Even Gov. Rick Perry, who has repeatedly opposed tapping the state’s savings account for the shortfall, last week cracked open the door to using part of the account — just not “emptying” it. The Rainy Day Fund will have more than $9 billion in it when the next budget period ends in 2013, officials say.

“I think the political argument is going to revolve not on whether you spend it or not, but how much do you spend,” said Sen. Steve Ogden, author of the Senate version of the budget and chairman of the chamber’s powerful Senate Finance Committee.

Accounting tricks are another easy option. Influential state Rep. Jim Pitts, chairman of the House Appropriations Committee, said the payment deferrals would bring in anywhere from $2 billion to $4 billion, and officials say there is broad agreement for doing it.

Modest fee increases also are possible, and more than $800 million in federal education money could be added before the session ends in May. The federal dough has been tied up in a partisan squabble between Austin and Washington.

It’s too early to say what the final state budget will look like this summer, and cuts are likely to be painful and probably historic — particularly in public education. But it’s clear that the spending plan that goes into effect next year will have a lot more money in it than the first drafts that are causing such alarm among lawmakers, health care providers and school districts.

The budget is “not going to be anywhere near (as low as) what’s being discussed right now,” said Bill Hammond, president of the conservative Texas Association of Business, a chamber-of-commerce type group. “Even the most ferociously conservative members understand that.”

Hammond last week urged lawmakers to make up the $15 billion with new revenue that included legalizing gambling, dipping into the huge Rainy Day Fund, kicking forward certain large financial obligations into the future and broader use of a multi-billion dollar education endowment to pay for public school programs.

Gambling would be the toughest and least likely among the options in the conservative Legislature. But top state leaders now agree the Rainy Day Fund will be tapped for at least $3-4 billion, maybe more.

The talk of new revenue comes as lawmakers are beginning to hear from educators, health care providers and advocates for the poor about the impact of the proposals under consideration in the Legislature. The initial budgets would leave public schools with up to $10 billion short, or 25 percent less state funding, than what state law requires, figures show.

That has prompted fears that tens of thousands of teachers could be laid off and that school campuses could be shuttered and consolidated.

“The cuts we’ve seen are very severe,” said conservative Republican Rep. George Lavender of Texarkana, a newly elected tea-party-backed member who campaigned against bloated government. “I’m hoping this will be just an initial budget and we’ll be able to restore a lot of the funding for schools.”

Lavender said he opposes tax increases but would favor taking money from the Rainy Day Fund.

Rep. Jim Keffer, R-Eastland, said voters in his district are beginning to hear about the cuts and are calling his office flummoxed. Taking a swipe at Perry, Keffer said many of them had been listening to the governor’s lofty campaign rhetoric and now see a different reality.

“I’m getting a lot of emails and phone calls from people who are surprised that we even have a budget problem at all based on what his campaign looked like,” Keffer said. “There’s a lot of people waking up to the fact that we have, not just a little deficit, but a big bear.”

Keffer said he could not vote for the bill as currently drafted and has no doubt the final legislation will have more funding in it, including money for tiny Ranger College in his district. It’s one of four community colleges targeted for closure in the first draft of the budget.

Republicans have pushed through cuts before. In 2003, lawmakers emptied the Rainy Day Fund, then far smaller at about $1.2 billion. They also raised almost $3 billion in fees and cost-shifting moves and used accounting gimmicks and deep spending reductions in social services to help make up a $10 billion shortfall.

But the proposed cuts this year are fraying nerves like never before. Sen. Leticia Van De Putte, leader of the Senate Democrats, said tearful testimony has made the budget-writing Senate Finance Committee take on the feel of a “funeral parlor.”

“We’re having to put out Kleenex boxes at all the different seats everywhere, because of the families, the Texans, who understand what a precarious situation we’re in.”

Democratic Sen. Kirk Watson says Republican leaders are deliberately promoting worst-case scenarios so they can “save the day” by passing a budget that’s not quite as awful as it might have been.

Even after tapping into more revenue to enlarge the draft budget, Pitts, the chief House budget, predicts the final product will be the grimmest he’s ever seen.

“This is my 20th year and this is the biggest cut I know of,” Pitts said. “People compare it to ’03, but ’03 was a cakewalk compared to this.”